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I am in a weird financial situation and wanted some advice.

First of all my wife and I bought a car two years ago for 2,000 over the MSRP and have a higher interest rate about 10%. So in the two years we've had the car we've made almost no progress on the principal even with paying $500 in monthly payments. 280 towards principle and 220 towards interest. We currently still owe $23,000. This is ridiculous, we were really dumb and needed a new car at the time because of our second kid. Since I've found out about that I've wanted to get rid of the car.

Recently we came into $7500 dollars and I am wanting some advice on the best thing to do. These are the options that I can see but there may be other.

  • We pay the $7500 towards our current cars principle, sell it and then get a loan for a much cheaper car(we already have an offer for $15,500 from carmax and we can sell it after we put the $7500 dollars into it). This options kind of sucks because we're out the $7500 dollar and have no car and nothing to show for it but we won't have the ridiculous monthly car payment.
  • We pay the $7500 towards the car, re-finance and keep the car for 5 more years(This isn't the ideal situation for us because we need a bigger car than this one, kids!)
  • We pay the $7500 towards the car and trade it in for a different cheaper car that way we're not exactly getting nothing out of the deal and we have a larger car which we need.
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  • How much is the car worth and how much do you owe on it?
    – Hart CO
    Commented Feb 22, 2021 at 19:24
  • @HartCO The car is worth 15,500 to CARMAX and I owe 23,000.
    – Sam_in_real_life
    Commented Feb 22, 2021 at 19:34
  • Can you afford to make any extra payments than the required payment? If so, how much? How much time is left on the loan?
    – D Stanley
    Commented Feb 22, 2021 at 19:36
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    Whatever you do, don't spend as much on your new car as you did on the previous car. Consider as well whether a good used car will suffice. You may need to replace it sooner, but a far bigger chunk of your money will actually go into the car, rather than the internet payments. (Especially if you can't do better than a 10% interest rate, which is absurdly high.)
    – chepner
    Commented Feb 22, 2021 at 19:53
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    As of a couple years ago Carmax averaged over $2k gross profit per car sold. So you can expect fair market value of your car to be at least $17,500 (not sure how much their operating expenses are per car sold but could estimate a couple hundred at least and add that in). Other dealerships also buy used cars, probably worth cleaning it up as best you can and trying to sell both to private buyers and other dealerships.
    – Hart CO
    Commented Feb 22, 2021 at 21:26

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It may be worth the effort to sell the car yourself and get the maximum value for it. Here's an article explaining how to sell a car to a private party when you have an existing car loan.

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